Lesson 1

Why You Should Sell on Amazon

The reason every seller should consider doing business on Amazon.com is obvious: By selling on Amazon, you can reach a far larger customer base than found on any of the other e-commerce platforms, including eBay. Even more exciting is the fact that you can potentially make more money by doing less work!

Amazon is far from the perfect place to sell, but it offers a wide variety of advantages, especially for those who wish to reach a larger and more diverse clientele, one that spends a lot of money online.

Here are a few important reasons why you as a seller should jump on board the Amazon.com bandwagon:

Large Number of Potential Customers

The number of potential customers you can reach through Amazon.com is more than triple the number of potential eBay customers. Statistia estimates the number of Amazon.com customers at 237 million. In a recent Forbes article, the Trefis Team estimated the number of active eBay users at 70 million. If these estimates are correct, you will reach over three times as many potential customers if you sell on Amazon.com.

As a seller, you now have 237 million reasons to get started on Amazon!

People Love to Shop With Amazon.com

People spend a lot of money on Amazon.com, and the amount of money they spend is increasing fast. Amazon.com reported a revenue (the total amount of money it earns from sales) of $81.76 billion in June this year. In June last year, Amazon.com’s revenue was $66.85 billion, according to Ycharts.

eBay reported a revenue of $17.05 billion. That means people spend over three times as much on Amazon.com as they do on eBay. A survey by the firm RBC quoted by Motley Fool writer Daniel Kline noted that the average Amazon customer in the U.S. spends $320 a year on Amazon.

What do these figures mean for the average seller? For starters, you should recognize the incredible amount of business to be had on Amazon. The tricky part is capturing some of this business for yourself.

Reputation

Amazon.com has a much better reputation than eBay. Many people will not shop on eBay because they regard it as cheap and dishonest. Those same people love Amazon.com and shop there regularly.

Every seller should keep this in mind if they are choosing between the two big e-commerce platforms.

Amazon Prime

Programs like Amazon Prime can increase your revenues and customer base. Prime does this by encouraging customers to spend more money by offering incentives, such as giving customers free two-day shipping on a wide variety of products with no minimum order.

A survey of 2,000 U.S. Amazon.com customers by RBC found that the average Amazon Prime customer spent $538 a year on the site. Compare this to the $320 that the average Amazon customer spends and you will see the instant advantage to using Prime in your Amazon e-commerce strategy.

No Listing Fee

You will not have to pay anything to list an item on Amazon.com. In fact, you will not be charged until you actually sell something. This means you can list more items and leave the listings up longer, which is great news for a seller!

Be aware, however, that Amazon.com will take a hefty cut out of the sales price, usually around 20 percent. Amazon will take out an even larger cut if you participate in programs like Fulfilment By Amazon (FBA).

Less Work

You may be able to do less work when you sell on Amazon.com. Unlike eBay, you won’t have to continually relist items, but you will have to handle the shipping and customer service chores unless you opt for FBA. The Fulfillment By Amazon program handles these tasks for American and UK sellers. (FBA is not available in Australia yet.)

We highly recommend that you read our article on Fulfillment By Amazon (LINK) if you are interested in reducing your workload as a seller.

Higher Prices

You can usually charge higher prices on Amazon. Amazon.com is basically a retailer. A retailer makes money by selling items at a competitive price; this is in contrast to a wholesaler (which charges the lowest price possible).

For example, on eBay (a wholesale market) the lowest price for women’s Ariat shirts was $5, whereas the average price for an Ariat shirt on Amazon.com was around $40. Part of the reason for this is that the items for sale on Amazon are usually new, while the items on eBay are often used.

Note: It can be hard to price items on Amazon.com and eBay because both sites list artificially low prices in an attempt to drive sales.

Trust Factor

Amazon.com is one of the most trusted brands in the world. People like Amazon.com, and many of its customers in the United States are willing to pay $99 a year to participate in the Amazon Prime service.

So what’s the takeaway point here? If you sell your products through Amazon.com, your business will be associated with a brand that customers know and, more importantly, trust.

A Chance for the Little Guys

It is impossible for the average person to get a product onto the shelves at a big retailer such as Walmart without spending a lot of money (or having some serious connections). Yet anybody can list a product at Amazon.com and put their wares before 237 million customers worldwide.

Testing Purposes

Selling through Amazon.com is one of the best ways to test the market for a new product. Amazon.com data can show you whether there is a demand for a product, what that demand is, and, more importantly, what you can charge for the product.

Take, for example, this search query on Amazon.com:

Now we know that ASICS shoes are more popular than Nike, at least on Amazon. Furthermore, we know that the price range for the two ASICS running shoes is $47-$65.

Needless to say, this data is critical for those planning to launch a successful online store. In fact, you should not even think about launching an online store before you do your research on Amazon.

From Amazon to Your Online Store

Amazon.com can be a great means of driving customers to your online store. If you can gather contact information from your Amazon.com buyers, you can tell them about offers or products that are not available through Amazon.com.

This is long-term strategy, but every seller should have this in mind when they start off.

Amazon Associates

As a seller, you can take advantage of the Amazon Associates service to promote products related to your industry on your website. This is basically an affiliate program where you earn commissions for sales. There is a danger, however, that there will be a conflict of interest between the products you sell and the products you promote.

The only way to avoid this conflict is to select the products you promote very carefully. The last thing you want to do is cannibalize your business (i.e., compete with yourself).

Amazon is on the Cutting Edge of Online Retail

Make no mistake about it, Amazon is the cutting edge of online retail. So selling on Amazon is the best way to stay on top of the latest developments in online retail. It gives you a leg up because sellers who use Amazon.com will not be surprised by new technology or other developments in the market.

As you can see, there are a lot of good reasons to start selling on Amazon.com. If you’re interested in reaching a much larger customer base and increasing your sales volume, Amazon.com can be an incredible resource. Just keep in mind that it has some drawbacks, as you will see in a future article in our series.

The best way to see if Amazon.com is for you is to simply try your hand at selling a few products on the platform. As with eBay, Amazon.com is not for everybody. But there is no question that it can grow your business exponentially.